Wednesday, October 31, 2007

Review: The Business of Software

This is an above average book about software business, which gives a pretty good insight into Service Company and Product Company, and also what to lookout for in running a software business. It’s not great, but nevertheless a good read as well.


It seems like being a Service Company (customize solution and consultancy, think Formis) or Product Company (actual product, think UBS Accounting) have an equal chance of success. It is not so much of choosing between a Service or Product company, but how much to emphasize on them at different time. But what about those Social Networking or Online Advertising kind of business, it seems like a new hybrid of Service+Product (create a product to provide service, and you generate income not by selling your product, but selling your service, or popularity).

When we are small (which I am now), we should be more Product Centric, focusing on Best Product, Ease of Use, Elegant, Cheapest Pricing, Unique Functionality and etc. When we are big, we should focus be more Market Centric, focusing on Largest Install Base, Most 3rd Part Support, De Facto Standard, Lowest Cost on Ownership and Best Quality of Support.

Creditability is utmost important, defend it at all cost. If you loose your creditability, you loose your customer.

Eat your own dog food = User you won product.

Niche market and new platform are the best places to look for new software product and service opportunity.

The goal of every software company should be to establish large and growing revenue that are recurring through Service and Maintenance Contract, Upgrades and Complementary Product.

Software service company should always remain profitable if it manages head count and expenses carefully.

Some Rules
  • Assemble allies
  • Pre-empt competition, through rapid design cycles and penetration pricing
  • Manage customer expectation with aggressive marketing, public road map and easy product announcement
  • Don’t become complacent, continuous product improvement
  • If you are out of the Standard, try to compete on Price/Performance, Quality and Service

A Strong Startup (though I agree with the idea, but I am not sure how to achieve it)
  • Strong Management Team
  • Attractive Market
  • Compelling new product, service or hybrid solution
  • Strong evidence or customer interest
  • A plan to overcome creditability gap
  • A business model showing early growth and profit potential
  • Flexibility and strategy and product offering
  • The potential for a large payoff to investors

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